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What’s Behind America’s Shocking Baby Formula Shortage?

America’s infant formula shortage has gone from an odd inconvenience to a full-blown national crisis.

In many states, including Texas and Tennessee, more than half of the formula is sold out in stores. Nationwide, 40 percent of infant formula is out of stock — a twenty-fold increase since the first half of 2021. As parents have begun to hoard infant formula, retailers like Walgreens, CVS and Target have all moved to limit purchases.

The lack of everything is not new. But rationing essentials for desperate parents? It’s a twisted twist in the history of American scarcity.

Three factors are driving the US baby food shortage: bacteria, a virus and a trade policy.

First the bacteria. After the recent death of at least two infants from a rare infection, the Food and Drug Administration investigated Abbott, a major infant formula manufacturer, and found traces of the pathogen Cronobacter sakazakii at a plant in Michigan. As a result, the FDA recalled several brands of infant formula, and parents were advised not to purchase or use infant formula tied to the plant.

Callbacks are common. Thousands of drugs and products are recalled each year, and they don’t meltdown pharmacies or require CVS to implement Soviet-style rationing of essentials. So here’s something else.

Which brings us to the second cause: the virus. The pandemic has disrupted all types of supply chains, but I can’t think of a market more shaken up than infant formula. “In the spring of 2020, formula sales skyrocketed as people hoarded formula the same way they hoarded toilet paper,” Lyman Stone, director of research at consulting firm Demographic Intelligence, told me. Then, as “families worked up their supplies, sales plummeted. These fluctuations made planning production extremely difficult. It’s been difficult to get a picture of the actual market size.” Meanwhile, Stone’s research found that an increase in births in early 2022 was accompanied by a “very dramatic drop in breastfeeding rates” among new mothers, driving demand for infant formula back into the has driven up.

In short: demand for infant formula skyrocketed as parents hoarded in 2020; then demand fell, prompting suppliers to scale back production until 2021; and now, with more young mothers demanding more infant formula in 2022, orders are rising faster as supply recovers.

Finally, the third factor: America’s regulatory and trade policies. And while that might not sound as interesting as bacteria and viruses to most people, it might be the most important part of the story.

FDA regulations on formulas are so strict that most stuff coming out of Europe is illegal to buy here due to formalities like labeling requirements. Still, a study found that many European formulas meet the FDA’s nutritional guidelines — and in some ways may even do better than American formulas, since the European Union bans certain sugars like corn syrup and requires formulas to contain a higher percentage of lactose.

Some parents, unconcerned with FDA imprimatur, try to circumvent regulations by ordering formula from Europe through third-party suppliers. However, US Customs officials have been known to seize shipments at the border.

US policy also restricts the import of formulas does Meet FDA requirements. For large quantities, the tax on formula imports can exceed 17 percent. And under President Donald Trump, the USA concluded a new North American trade agreement that actively prohibits the import of formula food from our largest trading partner, Canada.

America’s formulaic politics distorts the industry in yet another way. The Department of Agriculture has a special group called WIC — short for Special Supplemental Nutrition Program for Women, Infants, and Children — that provides a variety of services for pregnant and breastfeeding women and their young children. It is also the largest buyer of infant formula in the United States, placing orders with a small number of licensed infant formula manufacturers. As a result, the US baby food industry is inherently tiny. A 2011 USDA analysis found that three companies accounted for virtually all US formula sales: Abbott, Mead Johnson, and Gerber.

The Biden administration is focused on expanding domestic formula manufacturing to meet families’ needs. But the bigger problem is our trade policy. “The US is a locked market for domestic milk producers like Abbott, and in times of crisis the lack of alternative supplies becomes a pretty big problem,” says Scott Lincicome, director of general economics and trade at the Cato Institute, a libertarian thinker Panzer told me .

Conservative populists and even liberals who are skeptical of globalization sometimes argue that our economy would be more resilient if the US did everything within our borders. But the lack of baby food suggests things don’t always go that way. Instead, we see what happens when we reduce trade with other countries for an essential good: We’re more vulnerable to emergencies like a bacteria-infested Michigan facility.

There is a better way. “What we want to maximize is overall global capacity and system-wide flexibility and dynamism,” Lincicome said. “The location of the supply doesn’t matter as much as it does as much as possible in a flexible system that can substitute the supply of one facility for another.”

America’s sensible instinct to protect infants has morphed into unduly protectionist trade policies, leaving the US infant formula market extremely vulnerable to existential shocks (like a pandemic) and national shocks (like a major recall). These days, shocks are everywhere, and that’s why baby formula isn’t.

https://www.theatlantic.com/ideas/archive/2022/05/baby-formula-shortage-abbott-recall/629828/?utm_source=feed What’s Behind America’s Shocking Baby Formula Shortage?

Jessica MacLeish

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